Russia, which is chairing the G20 in 2013, will spend around around $215 million organizing G20 events. Source: Reuters

In anticipation
of the September G20 Summit in St. Petersburg, Ernst & Young has published
a report on the state of business activity in the 20 member countries. The main
obstacle to the development of entrepreneurship in Russia, according to the
study, remains the problem of attracting investments.

However, in terms of the
level of state regulation and taxation of business, the Russian Federation is
already ahead of its BRICS neighbors and even some EU countries.

Around 1,500
companies from the G20 countries took part in the Ernst & Young (E&Y)
survey. The respondents were asked to rate the quality of their national
business climate by five parameters: access to financing, tax burden, labor
force qualification, level of overall support and development of business
culture.

As a result, the G20 members were divided into four groups of five
countries each, among which the first group had the highest marks.

The leaders were
predictable: the United States, the United Kingdom, Canada, Australia and South
Korea. The second group included the European Union as a whole, France,
Germany, South Africa and Japan.

Russia made it into the third group — it turns
out that the conditions of doing business in the Russian Federation are, in
general, comparable to those in Brazil, China, Mexico and Saudi Arabia. The
last group included Argentina, India, Indonesia, Italy and Turkey.

The authors of the
report also noted that, to stimulate entrepreneurial activity, it is critical
to facilitate access to financing; they recommend that governments provide
state guarantees for loans to startups and small businesses.

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Russia is already
following this recommendation. Currently, the Russian government is considering
a proposal created by the Ministry of Economic Development, which calls for the
establishment of a Federal Guarantee Fund of 100 billion rubles ($3 billion).

The fund would
contribute to the reduction of interest rates on loans to small and
medium-sized enterprises (SMEs) — at least to the level of 10 percent per annum.
In the meantime, Russia is 15th out of 20 countries in terms of availability
of financing; it is behind not only China, but also Brazil, India and
Indonesia. The first place is held by the United States.

Survey respondents
rated the creation of infrastructure for entrepreneurs (business incubators,
joint research projects with leading universities, representation of interests
of entrepreneurs in the government), and Russia leads the sub-ratings of
overall business support.

However, E&Y points out that this figure reflects
the “tendency towards the improvement of conditions,” rather than their present
state.

This conclusion is
also confirmed by the fact that the level of employment in Russian SMEs is
still the lowest among the G20 countries: Only 17 percent of the total
workforce is employed there. By comparison, this figure is 59 percent in
Germany, 47 percent in the U.S., and 37 percent in Brazil.

In the tax
sub-ratings, the Russian Federation occupies ninth place, ahead of the EU and
the United States. In first place is Saudi Arabia, where residents are exempt
from income tax, the rate of insurance premiums is 11 percent, and the
corporate tax rate is 20 percent.

In the section referring to proposals to
improve the business climate, the report’s authors noted the importance of tax
incentives for business startups.

The Russian
government is now discussing the possibility of introducing a two-year tax
holiday for newly established small companies; the plan is to provide an
exemption from all taxes. However, E&Y notes that the reduction of fixed
taxes (not depending on the turnover) — especially for real estate or insurance
premiums — is more effective, in this case, than income tax reductions.